If you tell your employees that you will treat them poorly, and that there is no certainty that you will keep the promises you made to them about compensation, there is a good chance they will go work for someone else. Well, that’s what is finally happening in the financial industry. According to CNN Money:
And nowhere is that pain being felt more acutely than at Citigroup (C, Fortune 500) and Bank of America (BAC, Fortune 500), the two banks that have received the most aid from the government and are subject to the most onerous restrictions on executive compensation.
TARP banks in particular are feeling the pain:
Parsons’ remarks illustrate how difficult it has become for large, troubled financial institutions to attract and retain top employees — especially those like Citi and BofA which are still part of the Treasury Department’s Troubled Asset Relief Program.
“It is normal but it is exacerbated by the fact that those who are stuck in TARP can’t compensate their people as well those who aren’t,” said Anton Schutz, president of Mendon Capital Advisors, a firm that invests in financial stocks.
But the worst is probably not over. Members of Congress are considering new rules to limit top executive compensation across the board in the country. Two weeks ago, George Mason University School of Law’s J. W. Verret testified before the House Committee on Financial Services during a hearing on Compensation Structure and Systemic Risk. He told Chairman Frank and his committee that there would be serious unintended consequences to their plans. Let’s just hope someone was listening.